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an individual, not a member of the stock exchange, not an officer of the corporation whose stock is listed, but a citizen not engaged in interstate commerce, from asking for a proxy to vote the stock of an outsider because the stock is listed on the stock exchange. Certainly that has no relation to the trading in the market of that stock. As I say, I could give numerous illustrations of the same nature.

Now, I take it that the power of Congress to regulate is to regulate "interstate commerce.' It must be commerce." You cannot regulate it if it is not" commerce.It must be “interstate" or you cannot regulate it. Those things which are not commerce or which are not interstate in their nature and have no necessary or essential connection with interstate commerce are quite beyond the power of Congress. You agree with that?

Commissioner LANDIS. Yes; I agree with that general principle.

Mr. HuddLESTON. Now then, we come to a question of fact. I think I can point out, as I say, numerous instances in here in which we are attempting to regulate activities or actions—I do not know just what word to use—but to regulate acts which have no necessary relation to interstate commerce.

Commissioner LANDIS. Let me take your two illustrations there. One, the illustration of loaning by members of the exchange on any stocks that they may carry. The constitutionality of that rests upon the contention that, as a matter of fact, in order to regulate the exchange you need to regulate the amount of credit that goes into the exchange. That credit that goes into the exchange goes in through the members of the exchange. You have to regulate all of their activities with reference to credit in order to be sure that they will not employ particular facilities that are not on the exchange as a means of evading the requirements. I think you could tie that thing up with the whole purpose of regulating the exchanges.

Mr. HUDDLESTON. There you can say that merely because a man is a broker he cannot lend a friend $5 to buy a basket of groceries?

Commissioner LANDIS. That would be going a little bit too far. Mr. HUDDLESTON. No farther than it he wanted to buy a nonlisted stock from somebody else or something of that kind.

Commissioner LANDIS. But

Mr. Huddleston. But you cannot say because a man is a broker that his activities with reference to stocks

Commissioner LANDIS (interposing). I can say this

Mr. HUDDLESTON (continuing). Although they are not stocks listed on the exchanges

Commissioner LANDIS. They can be regulated, because he can use the unlisted securities to defeat regulation.

Mr. HUDDLESTON. Regulate his dealing in that particular article of commerce—we will say a share of stock.

Commissioner LANDIS. Yes.

Mr. HUDDLESTON. Yet you say that you cannot regulate him if he is dealing in a commodity?

Commissioner LANDIS. Yes.

Mr. HUDDLESTON. That is more than I can understand, because the question of credit is involved in both cases.

Commissioner Landis. The point that I should make there arises from a general principle. It is purely a question of fact as to whether it falls within the principle you enunciate or within a different

principle. Another principle is that you can regulate activities which can be resorted to by persons, even though you cannot regulate them independently, because they can be resorted to to evade regulation. You have that authority that goes with the power to regulate what you can clearly regulate. That principle is quite clearly recognized in the law.

Mr. HUDDLESTON. May I call your attention to the fact that we are not assuming to regulate "securities.” We are not dealing with securities as such.

Commissioner LANDIS. No?

Mr. HuddLESTON. We are dealing with the market, just as we would deal with-well, we will say the produce exchange.

Now, what happens to those securities when they are not in the market, when they are not being dealt in in the market, is none of our concern.

Commissioner LANDIs. I think it is your concern for this reason, because what happens to those securities when they are not in the market is a method that can be used to avoid the type of regulation that you want to accomplish.

Mr. HUDDLESTON. Carried to that extent, here is a man engaged in the growing of a field of wheat in the State of Illinois. Eventually it may get to the produce exchanges. Eventually it may be dealt with there. Whether he makes a good yield or not has an effect on the exchange, but that is immaterial because the rules laid down by the Supreme Court are that you cannot control that. That was laid down in the Bailey v. Drexel case, the Mississippi Cotton Oil Co. case, and in other cases, the court has said that the commerce clause does not have any relation to production.

Commissioner LANDIS. It is entirely a question of degree, yes.

Mr. HUDDLESTON. As I made the remark to a witness yesterday, no human activity but has a relation, remote though it may be

Commissioner Landis. Yes.
Mr. HUDDLESTON. To every other activity.

Commissioner LANDIS. And it is the judgment on that degree of relationship that is the deciding factor. It is the judgment on that degree of relationship.

Mr. HUDDLESTON. We not only forbid that a broker should lend but require that he shall borrow from nonbrokers.

Commissioner LANDIS. Yes.

Mr. HUDDLESTON. And we forbid that he shall borrow on securities that are not listed.

If we have the power to do that we have the power to limit every activity the broker has.

Commissioner Landis. Why, I do not think that you have that. You have not got the right to limit the broker's wearing of a blue tie instead of a brown tie.

Mr. HUDDLESTON. If it affects his credit.

Commissioner LANDIS. If it does, I quite agree with you you can regulate it. If you can show that it is important that a blue tie should be worn by a broker on the exchange, then Congress has the power to prescribe that sort of tie. It is a matter of judgment, and on that question of judgment a congressional determination ought to have a great deal of weight with any court. Congress has determined those things are so interrelated with the activities on the exchange, with

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everything which it has the power to control, that it is entitled to go out and control those things.

The CHAIRMAN. Any further questions?

Mr. MERRITT. I would like to ask a question, leaving aside the question of constitutional power. This is on page 42, section 16, relating to accounts and records and so forth, which provides that the exchanges or any member shall give a full report of all his transaction and his whole business and shall do it at his own expense, including the expenses of an examiner. Is that not rather unfair?

Commissioner LANDIS. That is a very common provision. That is contained in many regulatory statutes, where you put the expense of the examination upon the person whose conduct has been responsible for that examination.

Mr. MERRITT. But he must be a member of the exchange?

Commissioner LANDIS. That is one of the conditions. He takes that into consideration, and that is one of the conditions to being a member of the exchange.

Mr. MERRITT. He did not, when he first became a member?
Commissioner LANDIS. What is that, sir?
Mr. MERRITT. He did not. A new member might.

Commissioner LANDIS. Well, it makes no difference whether he is a new member or not.

Mr. MERRITT. It makes no difference whether he is a new member or not?

Commissioner Landis. No.
Mr. MERRITT. I suppose not. It is merely a matter of justice?
Commissioner Landis. That is a common provision.

Mr. MERRITT. I know that it is as to the bank examiners and so forth.

Commissioner Landis. Yes.

Mr. MERRITT. But, I think where you go to 100 members of the exchange and make them give up information as to their private business that is rather a questionable thing, anyway. It seems to me that it is an unfair proposition.

Then, on the next page, section 17, you stick to the old idea that seems contrary to the idea of the English common law that a man has got to prove himself innocent instead of somebody else proving his guilt.

Commissioner LANDIS. That is not so, Mr. Merritt. I think that I can cite a few authorities to that effect. If that is so as to this bill, then it would be as to the securities act.

There is no principle in the common law to the effect that in civil cases the burden of proof must always rest upon the plaintiff. That is not so.

Mr. MERRITT. No. Commissioner Landis. That is not so in civil cases. This principle of shifting the burden of proof is a very old principle. It is recognized in the common law. It is recognized in the statutes of every State. The whole theory of that is that where one of the two parties litigant has the facts within his own knowledge, has those facts peculiarly within his own knowledge, the burden of going into court and offering evidence with reference to those facts should, as a matter of justice, be placed upon that party. That rule is known to the common law. That rule has been adopted in numerous States. It is simply an appli

cation of the general principle that I described. This is nothing new. It must not be confused with the rule of the criminal law that a man is supposed to be innocent until he is proven guilty.

Mr. MERRITT. There is involved a certain criminal provision, with penalties.

Commissioner LANDIS. Yes; but this section does not apply to those. Mr. MAPES. Mr. ChairmanThe CHAIRMAN. Mr. Mapes. Mr. MAPES. I should like to ask Mr. Landis some questions, as long as he is before the committee, about the work of the Commission.

What is the personnel-how large an organization is the Federal Trade Commission?

Commissioner LANDIS. In the organization now there are five commissioners, as you know.

Mr. Mapes. Yes.

Commissioner LANDIS. And the personnel of the Commission is about 390. I cannot give the exact figures; they change day by day.

Mr. MAPES. Is it your special duty to administer the securities act?

Commissioner LANDIS. Well, I am technically in charge of the securities division. Action by the Commission is always full action. There is no divisional action there. Whatever the Commission acts upon is full action of the five members of the Commission.

Mr. Mapes. How large a personnel is devoted rather exclusively to the work of the administration of the Securities Act?

Commissioner LANDIS. About 65 men and women.

Mr. MAPES. Those have been taken on mostly since the passage of the Securities Act?

Commissioner LANDIS. Theoretically they have all been taken on. Actually we have moved over from some of the other divisions of the Commission, men we deemed had peculiar competence for this work. There have been about 15 or 20 of those men, accountants and the like.

Mr. Mapes. I suppose others from outside have been taken on to take the places of those men?

Commissioner Landis. Yes; sometimes not. Sometimes the particular work they were engaged on, for instance the chain-store investigation, stopped and it was not necessary to reemploy any other men in another division of the Commission.

Mr. Mapes. Have you in mind about how large a personnel would be required to administer the provisions of this stock exchange bill?

Commissioner LANDIS. I have not got in mind the numbers, but I do have in mind the personnel that will be required for the administration of this act will be very much larger than the personnel that is required for the administration of the securities division.

Our present personnel in the securities division is too small now. We had allotted to us by the Congress a quarter of a million dollars for the administration of that act. I was present-I did not actually speak; the chief of the division spoke--before a subcommittee of the House Committee on Appropriations on the necessity of more appropriations for the securities division, and he brought forth the fact that Since August 15, until December, some 8,000 hours' overtime was put in by that division. We worked in that division one third of the men almost every night until midnight. The work is too much in that

ision. The result is we have now pending in the independent

offices appropriation bill a request for a half a million dollars of which some $300,000 will go to the securities division which will enable us to just about double that staff and it will be needed very badly.

So that you can look at the Securities Division as better organized, as embracing somewhere between 120 and 140 men.

Mr. MAPES. And, how many did you say were in the Federal Trade Commission's organization as a whole?

Commissioner LANDIS. As a whole?
Mr. MAPES. Yes.
Commissioner LANDIS. About 390.
Mr. MAPES. About 390?
Commissioner LANDIS. Yes.

Mr. Mapes. Assuming the passage of this stock-exchange legislation, in your judgment, after that is enacted and the administration of that act is well on its way, will the stock exchange and the securities legislation work overbalance the rest of the work of the Commission?

Commissioner LANDIS. I am not sure that it will overbalance, because the work is growing everywhere, that is, the the work of the Commission. We are getting a tremendous amount of work now in connection with the N.Å.A. codes. We took on 40 men the other day for investigational work in that connection. Furthermore, our ordinary trade-practice work is picking up and for that reason it is rather hard to see what will be the ultimate outline of the Federal Trade Commission.

Mr. MAPES. Well, it will unless the other work expands a great deal, will it not?

Commissioner LANDIS. I think it will be true that these two acts, taken together, may represent the major activities of the Federal "Trade Commission. We have also been attempting for some time to get funds for the collection of general financial statistics, of a wider character than those required to be collected under these acts.

Mr. MAPES. How do you think the duties imposed upon the Commission by the securities Act and those that will be imposed by the passage of the Stock Exchange Act will harmonize with the other duties of the Federal Trade Commission?

Commissioner Landis. Pretty well, and I would just like to add this: We have two members of the Commission who are active in the Security Division work, primarily; that is myself and Commissioner Mathews. Commissioner Mathews is in charge of the Economic Division. Because of his extensive experience in securities, as commissioner of Securities in Wisconsin for many years, his aid is sought in the general work of the Securities Division.

Furthermore, the other members of the Commission who have had no special experience in this particular matter, but who have had experience, a great deal of experience, with the general work of the Commission, have contributed a great deal to what I would call the security work of the Commission. I say that it is a fine thing to have your own judgment checked up by them, by what might be called, not specialized knowledge, but, broadly speaking, common sense.

Mr. MAPES. Would there be any advantage in having a separate agency created that would have jurisdiction over the administration of the stock exchanges and over the Securities Act?

Commissioner LANDIS. I do not think there would be any advantage resulting from that, and I think there would be disadvantages. You

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